American Bonanza Gold Corp

Production Plans

Detailed analysis of the SRK study and the bulk-sampling program indicated that an underground mine is the preferred approach to selectively exploit the Fenelon deposit. The Fenelon Joint Venture (at the time, comprising Taurus and Fairstar) decided to conduct a mining test and feasibility study using underground development based on the mineral model prepared by SRK Consulting.

The design and partial construction has been completed for a decline ramp and underground workings, which provide access to the known high-grade gold resources at levels of 25 and 50 metres below bedrock surface. Costs have been established using bids from established mining contractors in the area. While the program is designed to prove up additional ore, study mining conditions and plan the long-term development of the project, the ramp can be constructed quickly and with minimum cost, which will allow early mining and shipping of an additional underground bulk sample of the known high-grade gold mineralization. The ramp is designed to allow continuous development of the deposit laterally and to depth. The underground development was started in October 2003, and site facilities and a full camp have been built. More than 250 metres of ramp and 550 metres of underground development have been accomplished since that time. The ramp has advanced to the 5195 elevation (55 metres below surface). About 8,300 tonnes of mineralized material, extracted as part of a mining-test and feasibility-study program and consisting of half stoped and half development rock, were milled as a bulk sample at the Camflo mill near Val-d'Or, Quebec. A total of 3,428 ounces of gold doré was shipped to the refinery. This produced approximately 2596 ounces of gold.

Resources in the developed area are estimated at 4,002 tonnes grading 18.36 grams of gold per tonne in the measured resources category, 51,682 tonnes grading 19.71 grams of gold per tonne in the indicated resources category and 27,245 tonnes grading 12.79 grams of gold per tonne in the inferred category. Total gold content in the measured and indicated categories amounts to 35,107 ounces. Total gold in the inferred category amounts to 11,204 ounces. These figures are estimated on the basis of a 5 g/t Au lower cut-off, with high-grade assays cut to 50 g/t Au for the measured resources and to 75 g/t Au for the indicated and inferred resources (Technical Report on the Resources Evaluation, Fenelon Project, Carl Pelletier, PGeo, Innovexplo inc, September 2004). The resource estimate is confined to a Volume of the central Discovery Zone approximately 160 metres long to a depth of 175 metres. This volume has been exposed in test-mine workings and drilled in sufficient detail to allow estimation of a measured and indicated resource. Approximately 80% of the reported resource occurs within 100 metres of the surface. The six veins that comprise this resource remain open to the east and at depth. Further drilling and development is planned to augment the current resource.